Senate GOP loses leverage to alter consumer agency

President Barack Obama, left, smiles as he stands with Richard Cordray, right, the new director of the Consumer Financial Protection Bureau, during a statement in the State Dining Room of the White House in Washington, Wednesday, July 17, 2013. The Senate voted on Tuesday, July 16, 2013, to end a two-year Republican blockade that was preventing Cordray from winning confirmation as director of the Consumer Financial Protection Bureau. (AP Photo/Susan Walsh)

WASHINGTON (AP) -- After a three-year political battle, Republicans have agreed to a remarkable concession over the powers of a new federal agency designed to protect consumers during financial dealings. In confirming the agency's director, GOP lawmakers stripped themselves of any leverage to curb the group's influence over banks, lenders and credit card companies.

The confirmation of Richard Cordray as head of the Consumer Financial Protection Bureau and his swearing in on Wednesday amounted to a clear victory for President Barack Obama. The president had made the consumer agency a key feature in his 2010 overhaul of financial regulations and turned an otherwise technical and esoteric piece of legislation into a populist symbol of change.

Cordray's agency is uniquely independent because it gets its money directly from the Federal Reserve. Republicans had demanded that the office be overseen by a bipartisan commission and that it be subject to annual congressional appropriations instead of direct funding from the Fed.

Cordray was confirmed Tuesday by a 66-34 vote, with 12 Republicans voting in his favor. It was a notable turnaround for a party that in February sent Obama a letter, signed by 43 of 45 Republican senators, vowing to block Cordray's nomination unless the agency was significantly changed.

Obama last year bypassed the Senate by appointing Cordray to the job when the Senate was not fully in session. Republicans challenged the appointment, arguing that the Senate was not officially in recess to permit Obama to act on his own.

Still, that appointment was to run out at the end of this year and the lack of a Senate-confirmed director had left the agency with limited authority to carry out the regulatory powers granted to it by the 2010 financial regulation law.

Without a confirmed director, the GOP betting went, Obama would ultimately have to cave.

"For two years, Republicans in the Senate refused to give Rich a simple yes-or-no vote, not because they didn't think he was the right person for the job, but because they didn't like the law that set up the consumer watchdog in the first place," Obama said Wednesday after Cordray was sworn in.

Democrats led by Senate Majority Leader Harry Reid of Nevada fought back, lumping together a series of blocked nominees and threatening to alter Senate rules to bypass the Republican blockade. By Tuesday morning, the confrontation had been averted. Obama won an agreement for votes on Cordray and four other nominations. Obama had to give ground by withdrawing two National Labor Relations Board nominees and submitting two new names to the Senate.

Sen. Lindsey Graham, R-S.C., one of those who signed the February letter, told reporters that a resolution of the filibuster-rule standoff began to take shape "when a couple of us admitted we'd gone too far with a guy like Cordray." Graham said he doesn't like the consumer agency, "but it's the law. And you can't deny an appointment because you don't like the underlying law."

The deal now frees Cordray and the consumer agency to move on with its mandate — to oversee and regulate banks, lenders and credit card companies in their dealings with the public.

In one of its major actions, the agency last year ordered three credit card companies — American Express, Discover and Capital One — to refund more than $400 million to about 6 million customers for using what it said were misleading tactics or pressure.

Obama also gave credit to the agency for addressing more than 175,000 consumer complaints, helping simplify credit card forms, and giving students and parents more information before taking out student loans.

Obama's so-called recess appointment of Cordray last year still poses questions about the actions taken by the agency during his tenure. Two federal appeals courts have said Obama overstepped his authority when he nominated two NLRB board members because the Senate was not in recess when he acted. Those courts invalidated actions of the NLRB as a result. The Supreme Court has agreed to hear one of those cases and the outcome could prompt effort to challenge the consumer agency's work as well.

Richard Hunt, president and CEO of the Consumer Bankers Association, praised Cordray for establishing a good relationship with his group but said he and his membership believe a commission would be a more effective consumer watchdog and cautioned that a Republican president may someday appoint a director who will enrage Democrats.

"We thought there was enormous power in the hands of one individual," he said. "With a commission you have a more deliberative body."

Republican Sen. Bob Corker of Tennessee, one of the two who declined to sign the February GOP letter, said he would continue to seek a different structure for the agency, but he credited Cordray for not alienating Republicans and by making himself accessible even to those who wanted to alter the agency he was overseeing.

"He has been very transparent with us," Corker said. "You ask him a question, he gives you an answer and even, candidly, when the answer isn't necessarily in his best interest to answer."

Still, Corker added: "Let's face it, he's confirmed and he'll have new freedom. I hope he's going to continue in the moderate, judicious way he has acted up until now."